VAT Implications of Providing Services to Other Countries

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| Lisa Cosgrave

What are the VAT implications of providing a training service to another EU country where the training is provided via recorded sessions or live sessions or in some cases where the service provider travels to the EU country (say Country B)?

A common question we are asked is with regards to the VAT implications of providing services to other countries outside Ireland whether they are within the EU or outside the EU. One recent example concerned a service which is provided to both VAT-registered and non-VAT-registered customers within the EU. The training which is pre-recorded would also be considered an electronically supplied service.

We examine the various VAT implications as follows:

Supplies to VAT-registered persons:

To determine the VAT implications, we look to the place of supply rules, contained in Section 34 VATCA2010. The general rule under subsection (a) states the place of supply of services to taxable persons is where that person’s business is established. Therefore, in this case the place of supply is Country B being the EU country.

There are exceptions to this rule, including in subsection (kc) electronically supplied services - which the online training would be, but the exception only applies to non-taxable persons which would not apply in this case, but I will examine that in the next section.

There is also an exception under subsection (g) it states if the supply of services, and of any ancillary services, is in respect of or related to admission to a cultural, artistic, sporting, scientific, educational, entertainment or similar event, such as a fair or exhibition [(including the supply of tickets granting access to such an event)], and the supply is to a taxable person, the place where that event actually takes place. Therefore, as she travels to Country B here for an educational event, the place of supply would still be Country B. This would not however apply in this case as it would be more of a lesson provided than an event.

If the place of supply is the EU, then the client is liable to VAT in the country in which the business customer is located and on receipt of the business customer's VAT number, the Irish supplier can 0% rate the invoices and the customer will account for domestic VAT in their own country.

It is very important that before issuing any invoice to their European customers that Irish suppliers do receive the correct documentation in order to identify whether they have a taxable or non-taxable status. While the provision of a VAT number (which should be checked on the EU site https://ec.europa.eu/taxation_customs/vies/#/vat-validation ) is often used, if the customer is only in the process of registering for VAT then the supply of appropriate documentation from the tax authority of that country will suffice until such time as the VAT number comes through.

If the Irish supplier is in any doubt as to the status of the customer, it must charge Irish VAT on their invoices. If the customer then supplies a VAT number within a reasonable time after issuance of the initial invoice, an adjustment can be made (i.e., issue a credit note for the original invoice and then issue a new invoice showing the VAT number, the 0% rate and the statement that the reverse charge system is being applied). The Irish supplier can then either amend the VAT return on which VAT was paid over initially or account for it in the next VAT return.

Supplies to non-VAT registered persons

If the training is to non-taxable persons, then the place of supply changes in that it would fall under the general rule of Section 34(b) i.e., the place of supply would be where the supplier is located in this case Ireland. Therefore, in that case, Irish VAT would apply. As the services being provided here have been indicated as training it would be worthwhile to consider if it would fall under educational and vocational training and would therefore be exempt.

However, as some of the services are electronically supplied services, subsection (kc) needs to be considered. In that, the place of supply (POS) would remain as Country B and therefore would be outside the scope of Irish VAT (not zero rated but outside the scope). In this case, it is more than likely the client will be required to register and account for Country B VAT.

If the training is pre-recorded and just available with no coach interaction, then they would be considered as Electronically supplied services.

Revenue guidance states that an electronically supplied service or ‘e-service’, is a service that is delivered over the Internet (or an electronic network which is reliant on the internet or similar network for its provision). The e-service is heavily dependent on information technology for its supply. This means the service is essentially automated, involves minimal human intervention and in the absence of information technology does not have viability. The use of the internet to convey information (for example by e-mail) in the course of a business transaction does not change the nature of the transaction and make it a supply of an e-service.

Therefore, in summary, the live training is not electronically supplied (POS is Ireland) whereas the recorded online sessions would be (POS is Country B).

Section 35A needs to be considered here if the services are electronically supplied. As of 1 July 2021, the place of supply threshold is €10,000 per calendar year. This means where the client sells over €10,000 to private individuals around Europe they will be required to register and account for VAT in each member state. If the supplies do not exceed €10,000 the place of supply is Ireland and Irish VAT applies per the above (in that the exemption could apply as I have discussed above).

Therefore, in this case, where sales to other EU states exceed €10,000, this would mean the client would (in the absence of using the OSS) have to register and account for VAT in each of those member states.

So it is possible to use the OSS for sales to non-VAT registered individuals. But it is not needed for sales to VAT-registered businesses.

The Union scheme OSS simplifies VAT obligations for businesses selling goods and services cross border to final consumers in the EU.

Once registered for the Union scheme, a taxable person can:

  • declare and pay EU VAT due on supplies made under the scheme in a single electronic quarterly return and
  • communicate with Revenue in relation to these returns, even where the sales are taxable in another Member State.

The following supplies can be declared in the Union scheme:

  • Cross-border supplies of telecommunications, broadcast and electronically supplied (TBE) services to non-taxable persons within the EU (as was previously the case under MOSS).
  • All other cross-border supplies of services to non-taxable persons within the EU.
  • Intra-Community distance sales of goods and
  • certain domestic supplies of goods (in specific circumstances).

As you can see, all of the intra-community distance sales (i.e., sales to non-taxable end-use consumers) can be declared through the one-stop shop. This stops the need to register for VAT in all of the countries the service provider is making distance sales to. The OSS Union scheme VAT return will include all EU VAT due in each Member State where a supply has been made under the scheme for the period in question. This VAT will be remitted to the Revenue Commissioners for onward transmission to the relevant Member States of consumption.

To summarise where the place of supply is Ireland, Irish VAT rates, apply, where the place of supply is an EU country and the customer is VAT registered the invoices can be zero-rated, but if the client is not VAT registered, the supplier can apply Irish VAT where sales are under €10,000 or use the OSS. But where they are in excess of the €10,000 the client may use the OSS.

The contents of this article are meant as a guide only and are not a substitute for professional advice. The authors accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.

If you require assistance or advice in relation to any of the above matters, please contact our team on 053 91 000 00 or email [email protected].

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About the Author

Lisa is a key member of our tax technical support team, providing advice on all tax heads in response to queries submitted. In addition, she provides support within the tax department on company/business valuations, tax planning, restructuring and exit planning solutions for a range of clients, liquidations, and company secretarial issues. She also has experience in financial reporting and audit. A Chartered Certified Accountant and Chartered Tax Advisor, Lisa trained and worked in practice for six years prior to joining OmniPro, where she gained experience in financial reporting, tax compliance across all tax heads and audit. She has experience with a range of small and medium sized businesses assisting them with their financial reporting obligations and tax compliance across all areas

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